Car Scams to Watch Out For

Image: Creditscorequick.comBuying a used car can save a pretty penny over a new one if you’re able to locate a good deal. But there are car scams out there that you’ll need to watch out for in order to protect yourself from being cheated.

Many of these car selling scams occur over the Internet and as a result, people should be especially careful when buying through online advertisements or auction sites. Here are a few of the most common car scams.
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Certified Check Scam

If you are selling a car and make it clear that you’ll only accept a cashier’s check for payment, you may be a prime target for this scam.

Let’s say a seller has agreed on a price of $12,000 for the purchase of his used car to a buyer. The buyer than “accidentally” sends a cashier’s check for $14,000 instead. He then tells the seller to just deposit the check and send him the overpayment of $2,000 by wire or cash.

Sounds reasonable enough, right? But what makes this a scam is that the cashier’s check is fake, and the amount of money you “refund” to the buyer is directly from your own cash reserves in the bank.

Even though it appeared that $14,000 was in the bank account, in reality, this was just a pending amount number, or not real cash until the check actually clears, and in this case, since the check was bogus, no amount of money was ever actually deposited.

It typically takes a certain amount of time for checks to clear, but by the time the victim sends the “refund” back, several days later the check bounces, and the seller is liable not only for the bounced check and any funds he may have already spent, but is also out the original $2,000 “refund.”

If you are requesting payment via a cashier’s check, make sure to wait until the check is accepted and cleared by your bank and that the funds have actually been deposited. You can also request to be present at the buyer’s bank to view the issuing of the cashier’s check as insurance against fraud.

Fake Escrow Services

When buying or selling cars online, it is sometimes necessary for the buyer to place the money in an escrow or holding account before the sale is finalized. An escrow account is used to protect the buyer and seller from any sleazy actions by either party. The money remains safe and sound until all the details of the transaction are finalized.

However, some shifty sellers will put your money into a fake escrow account. What really happens is that you place your money in a supposedly trusted firm, but as soon as you do this, the crook takes off with your cash.

If you ever have to use the services of an escrow account, do some research to make sure that it is a legitimate business.

Fake Online Auctions or Ads

If you are a seller of a car on an auction site, you may come across a buyer that is enthusiastic about the car and says that he'll send you the payment as soon as you ship or deliver the car. This situation is most likely a scam.

On the other side of things, if you are a buyer and the seller requests payment before you receive the vehicle, you may be a target for a scam as well.

The rule of thumb here for buyers or sellers of cars is to never deliver or hand over the merchandise without first clearing the payment from the bank. Refuse personal checks whenever possible, and do a thorough check on the reputation of the buyer or seller on the auction site.

Source: HowStuffWorks
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